A.K. Banerji, J.
1. The short question which is involved in the present winding-up petition is whether the petition is not maintainable on account of the fact that the statutory notice under Section 434(1)(a) of the Act was not served on the registered office of the company at Kanpur.
2. The relevant facts in brief are that Alliance Credit and Investment Ltd. ('the petitioner' in short) had entered into a lease agreement with Khaitan Hostombe Spinels Ltd. ('the respondent-company') in respect of one set of electrical equipment with certain terms and conditions con-tained in the lease agreement. One of the conditions therein was that the respondent was required to pay in advance lease rentals every quarter at Rs. 5,32,534 plus sales tax on the agreed dates mentioned in the schedule to the agreement. The petitioner's' case is that the cheque dated August 5, 1995, issued by the respondent-company in respect of the lease rental was dishonoured by the bank. Subsequently, another cheque for an identical amount met with the same fate. The petitioner served a statutory notice of demand dated September 6, 1995, which was served by registered post on the branch office of the company at Calcutta. In reply to the same, the respondent sent a letter requesting for about six weeks' time to make the payments. However, only a sum of Rs. 1 lakh was paid by cheque dated October 17, 1995, and the balance amount of the two cheques which were dishonoured were nbt paid despite repeated demands, hence, the present winding up petition was filed in this court under the provisions of Sections 433(e), 434 and 439 of the Companies Act, 1956 (hereinafter referred to as 'the Act').
3. In response to the notice issued by this court on the petition, the respondent-company filed an application supported by a short counter-affidavit in which a preliminary objection was raised to the effect that the statutory notice under Section 434(1)(a) of the Act dated September 6, 1995, was neither addressed to nor was served at the registered office of the respondent at Kanpur. Consequently, it was not a valid notice and the petition for winding up was not maintainable. It is this preliminary objection which is up for consideration before me.
4. On behalf of the petitioner, learned counsel, S. P. Mehrotra, has urged that the lease agreement was entered into between the parties at Calcutta. The cheques issued by the respondent-company were drawn on bankers at Calcutta, where they were dishonoured. The cheque for Rs. 1 lakh sent subsequently was also drawn on the bankers at Calcutta. The registered notice which was received at the Calcutta office of the respondent-company was replied to from Calcutta and four to six weeks' time was requested for making payment. In view of the same, it cannot be disputed that the registered notice of demand was served on therespondent-company who have not only replied to the same but have also acted upon their promise by sending a cheque for Rs. 1 lakh to the petitioner. Therefore, technically speaking, the notice was duly served on the respondent-company and it cannot be contended that the notice was invalid. Further, learned counsel has urged that the object of serving the notice is that the company must have knowledge of the demand made by the creditor and the said object has been served inasmuch as the company has accepted its liability and has not only promised to pay but has also in part performance paid a sum of Rs. 1 lakh. In support of his sub-missions that the provisions of Section 434(1)(a) of the Act are not to be strictly construed but only sufficient compliance was required, learned counsel has relied upon certain decisions. I have carefully perused the said decisions but none of them is strictly on the point as they do not pertain to a notice under Section 434(1)(a) of the Act.
5. In the case of C. R. Priyachandrakumar v. Purasawalkam Permanent Fund Ltd. [1995] 83 Comp Cas 150, the Madras High Court was considering the provisions of Section 173(2) of the Act which pertains to the explanatory statement to be annexed to the notice calling for the annual general meeting of the company. In this context, it was held by the court that Section 173(2) of the Act should not be construed in a rigid manner so as to hamper the conduct of business. The notice has to be construed in a realistic .business-like manner and if it satisfied the essence of Section 173(2).qf the Act, the meeting ought not to be invalidated on the technical ground that the notice had not complied with Section 173(2) of the Act. Similarly, in the case of Shailesh Harilal Shah v. Matushree Textiles Ltd. [1995] 82 Comp Cas 5 (Bom), the matter involved was where 21 clear days notice was required for holding a meeting under Section 171 of the Act had not been strictly complied with and the said notice was of a shorter duration, it was held by the Bombay High Court that looking to the object, purpose and scope of the provisions of Section 171(1) of the Act, the provision is merely directory and not mandatory. Learned counsel has also referred to the case of Deosaran Yadav v. State of Bihar, AIR 1972 Patna 439, and has contended that once the company has acted on the said notice, it will be deemed to have waived the irregularity, if any, by its conduct and is precluded from challenging its validity. The decision cited by learned counsel pertains to election proceedings to the post of Mukhia of Gram Panchayat and applying the principles of Section 115 of the Evidence Act, the Patna High Court had observed where the person having knowledge of the illegality of election proceedings participates in it he is precluded from challenging the validity of the election. The observation made in this case was in a different set of facts and has no direct bearing on the question involved in the case at hand. Learned counsel has also referred to the English decisionBailey, Hay and Co. Ltd., In re [1972] 42 Comp Cas 442 (ChD) ; [1971] 3 All ER 693. The facts of the said case were that an extraordinary general meeting of the company was called for the purpose of passing a resolution for voluntary winding up of the company. Out of the five shareholders who attended the meeting, the resolution was passed by two shareholders who between them held half of the shares. The remaining three abstained from voting. After 3-1/2 years, two of the shareholders challenged the meeting on the ground that the notice given was inadequate as the same was one day short of the period required to be given by the company's articles. It was held by the Chancery Division that the three shareholders who did not vote in favour of the resolution and allowed it to be passed, by their subsequent conduct must be deemed to have assented to it. Accordingly, the resolution was held to be valid. The facts of this case are also distinguishable and. is also not a direct authority for the controversy involved in the present case.
6. Before proceeding to consider the submission made by R. P. Agrawal, learned counsel for the respondent, it would be worthwhile to notice the provisions of Section 434(1)(a), (b) and (c) of the Act, which read as follows :
'434. Company when deemed unable to pay its debts.--(1) A company shall be deemed to be unable to pay its debts--(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding five hundred rupees then due, has served on the company, by causing it to be delivered at its registered office, by registered post or otherwise, a demand under his hand requiring the company to pay the sum so due and the company has for three weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor ;
(b) if execution or other process issued on a decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part ; or
(c) if it is proved to the satisfaction of the court that the company is unable to pay its, debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company.'
7. It will be noticed from the above that the company will be deemed to be unable to pay its debts under Section 434 of the Act under three conditions :
(1) The company is indebted in a sum exceeding five hundred rupees then due ;
(2) The company is served by causing it to be delivered at its registered office by registered post or otherwise a notice demanding the required sum to be paid by the company to the creditor giving notice ;
(3) The company has for three weeks thereafter neglected to pay thesum to the creditor.
8. As evident from the above, the object of Section 434 is to create a fiction as to when a company can be deemed to be unable to pay its debts. If the case is within the scope of the fiction, the company could be wound up. Learned counsel for the respondent-company has rightly contended that a legal fiction has to be strictly construed. It is well established that full effect is to be given to a statutory fiction and it should be carried to its logical conclusion (see State of Bombay v. Pandurang, AIR 1953 SC 244). In the facts of the present case at hand, it has been admitted in the petition itself that the registered office of the company is at Kanpur. It has also not been disputed that the statutory notice of demand sent by registered post was addressed to the Calcutta office of the company and it was served at the said place. The requirements of Section 434(1)(a) that the notice has to be served at the registered office of the company has, therefore, not admittedly been complied with. The question now is what will be the effect thereof. As noticed above, the contention of the petitioner is that since it was served on the company, may it be at its branch office at Calcutta, but as the same had been replied to and also partly complied with, the requirement has been substantially fulfilled and the object of the notice has been served. It has also been contended that as the company had not raised any objection at that time but had given a reply to the notice and had made part performance thereof, it would be deemed that it has waived its objection. I am unable to agree with the submission made by the petitioner as I am of the view that the-statutory fiction has to be strictly construed and if the same has not been complied with, the petition has to be dismissed on that score as not maintainable. I am supported in this view by some direct decisions of different High Courts. In the case of Bukhtiarpur Bihar Light Railway Company Ltd. v. Union of India [1954] 24 Comp Cas 507, 512, the Calcutta High Court, while interpreting a similar provision in the Indian Companies Act, 1913, has observed thus :
'If a notice of demand is to operate as a valid statutory notice under Section 163(1)(i) it is to be delivered to the company at its registered office. A letter addressed to a place other than the company's registered office cannot be relied upon by the creditor for the purposes of Section 163(1)(i).'
9. This case was referred to by a learned judge of the Calcutta High Court in Dytron (India) Limited, In re [1990] 69 Comp Cas 757. In the case of N. L. Mehta Cinema Enterprises (P.) Ltd. v. Pravinchandra P. Mehta [1991] 70 Comp Cas 31, a Division Bench of the Bombay High Court had held that Section 434 clearly requires the notice of demand tobe sent to the company at its registered office. Service of the notice at the administrative office of the company was not sufficient to raise the presumption under Section 434, therefore, the petition was liable to be dismissed. It was further laid down that the requirement contained in Section 434 has to be strictly complied with in order to raise the legal fiction. In the case of B. Viswanathan v. Seshasayee Paper and Boards Ltd. [1992] 73 Comp Cas 136 (Mad), where the notice under Section 434(1)(a) of the Act was not served on the company at its registered office, but on its managing director, it was held by the Madras High Court that the notice does not conform to the mandatory requirements of the Section and, therefore, the presumption under this section as to the company's inability to pay its debts .cannot be raised. Similarly, in Kalra Iron Stores v. Faridabad Fabricators (P.) Ltd. (No. 2) [1-991] 73 Comp Cas 337, it was held by the Delhi High Court that where the notice under Section 434(1)(a) of the Act was not proved to have been served at the registered office of the company, it was held that as the consequence of failure by a company to comply with the notice of demand sent under Section 434(1)(a) of the Act are of far reaching effect leading to the presumption that the company is unable to pay its debts,, the provision is required to be strictly construed and a creditor for relying upon the deemed inability of the company, to pay its debts has, to strictly comply with the requirements of service of notice of demanchin terms of Section 434(1)(a) of the Act.
10. Respectfully agreeing with the views laid down in the aforesaid cases, I am of the opinion that the submissions made by learned counsel to the effect that the provisions of Section 434(1)(a) of the Act are not required to be strictly construed and it has only to b6 noticed whether the object has been served, cannot be accepted if the provisions of Section 434 are invoked.
11. So far as the question of estoppel, acquiescence and waiver is concerned, I am of the view that the same also cannot be taken into account as the statutory fiction provided under Section 434(1)(a) of the Act has to be strictly complied with. I am supported in this view by a decision of the Bombay High Court in Vysya Bank Limited v. Randhir Steel and Alloys (P.) Ltd. [1993] 76 Comp Cas 244. In this case, the statutory notice was not served at the registered office of the company but at an address which the company had given for correspondence on the ground that there was no functioning office at the registered office and nobody received the notice which returned undelivered. It was held that Section 434 of the Act does not require that there should be any functioning office but the section requires it to be delivered at the registered office of the company. The deemed inability of the, company to pay its debts arises by satisfaction of the requirements laid down in Section 434 andthat was the basis of the company petition and, therefore, there could be no question of the waiver by the company. In the facts of the present case also it will be noticed that the petitioner has invoked the provisions of Section 434 of the Act. Consequently, I do not find any merits in the first submission made by learned counsel for the petitioner.
12. It was then contended that assuming that the notice was not served on the registered office of the company and, therefore, was not valid, however, the petitioner has filed this petition under Section 433(e) as well as under Section 434(1)(c) of the Act and, therefore, irrespective of the notice, the petitioner can show that the company is unable to pay its debts and, therefore, it should be wound up. In support of his submission, learned counsel for the petitioner has placed strong reliance upon the decision of the Calcutta High Court in Siddhartha Apparels (P.) Ltd., In re [1986] 59 Comp Cas 435, wherein it was held that although no statutory notice had been served on the company, however, the petitioning creditor could still prove that the company was otherwise unable to pay its debts, the court had relied upon an earlier Division Bench decision of the same court in Pandam Tea Company Ltd. v. Darjeeling Commercial Company Ltd. [1977] 47 Comp Cas 15, wherein it was held that if notice under Section 434 is treated as non-existent the petitioning creditor is entitled to prove by other evidence that the company was unable to pay its debts as indebtedness can be proved aliunde. Another judge of the Calcutta High Court had taken a similar view in the case of Darjeeling Bank Ltd., In re [1949] 19 Comp Cas 1, and held that the invalidity, if any, of a notice of demand under Section 163 of the (old Act) on the ground that it is addressed to the general manager and not to the company only prevent a creditor from getting the benefit of the presumption as to the company's inability to pay its debts but he can prove such inability as a fact aliunde and he can also rely on the just and equitable ground. A similar view has been taken in the case of Tripura Administration v. Tripura State Bank Ltd. [1960] 30 Comp Cas 324 (Tripura). A learned single judge of our court in Paramjit Lal Badhwar v. Prem Spinning and Weaving Mills Co. Ltd. 11986] 60 Comp Cas 420 (All), agreeing with the observations made in Tripura Administration v. Tripura State Bank Ltd. [1960] 30 Comp Cas 324 (Tripura), held that all the three clauses mentioned under Section 434 of the Act are disjunctive and has observed as follows (page 411) :
'If a notice given under Clause (a) is held to be invalid, then too it would be open to the petitioner to satisfy the court that the company is unable to pay its debts.'
13. In the case of Kalra Iron Stores v. Faridabad Fabricators (P.) Ltd. (No. 2) [1991] 73 Comp Cas 337, the Delhi High Court has also taken asimilar view and has held that even without invoking the deemed inability of a company to pay its debts, a creditor can seek winding up of a company under Section 433(e) read with Section 434(1)(c) of the Act on the ground that the company is unable to pay its debts. I, therefore, find substance in the submission made by learned counsel for the petitioner that irrespective of defective notice under Section 434(1)(a) of the Act, the petitioner can invoke the provisions of Section 433(e) read with Section 434(1)(c) of the Act and prove that the company is unable to pay its debts. It will, however, be noticed that Section 433 enumerates the circumstances in which the company may be wound up. (emphasis* supplied). Clause (e) of Section 433 states that a company may be wound up by the court if the company is unable to pay its debts. It is, therefore, very clear that it is the discretion of the court whether, in the circumstances of the case, it would be in the interest of justice to wind up the company. It is well settled that the winding up order is not granted mechanically as a matter of course but on proof of certain facts. Equitable considerations have a decisive effect even when the power to wind up a company is invoked under Section 433(e) of the Act. The court may, if there are sufficient counter-balancing equitable grounds or in appropriate cases even refuse altogether the winding up of the company in spite of the proved inability of a company to pay its debts. Exercise of such discretionary power must initially be governed by justice and equity. (See Alumunium Corporation of India Ltd. v. Laxmi Ratan Cotton Mills Co. Ltd. [1970] 40 Comp Cas 259 (All). Section 434(1)(c) of the Act lays) down that if it is proved to the satisfaction of the court that the company is unable to pay its debts and in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company. The purpose of Section 434(1)(c) read with Section 433(1)(e) is to determine the basic question of commercial solvency of the company. For this purpose, the court has to examine the company's inability to pay its debts with reference to the date when it becomes absolutely due for payment along with contingent and prospective liabilities of the company. The contingent and prospective liabilities are meant to be taken into account only when the total liabilities are to be weighed against the total realisable assets. In the case of Cine Industries and Recording Co. Ltd., In re [1942] 12 Comp Cas 215 (Bom), Mr. Justice Chagla (as he then was) held that the main consideration in a winding up application is the interest of the shareholders and creditors. The expression 'commercially insolvent' means that the existing assets and the liabilities of the company are such as to make it reasonably certain and the court is satisfied that the existing and probable assets would be insufficient to meet the existing liabilities.
14. Again, the other test is whether on the date of the presentation of the winding up petition there was any reasonable hope that the object of trading at a profit with a view to which the company was formed, could be attained. The expression 'commercially insolvent' means insolvent not in a technical sense but plainly and commercially insolvent, that is to say, that its assets are such and its existing liabilities are such as to make the court feel satisfied that the existing and probable assets would be insufficient to meet the existing liabilities. It is necessary to point out that the said view has been accepted by the Supreme Court in Pradeshiya Industrial and Investment Corporation of U. P. v. North India Petro Chemical Ltd. [1994] 79 Comp Cas 835 ; [1994] 1 JT 579 (SC).
15. In view of the settled position of law it is to be seen whether the petitioner has pleaded the required facts in the present petition before me. I do not find the requisite pleadings in the petition. In paragraph 16 thereof, it has been stated that the company has failed and neglected to pay the balance amount of the lease rental. In paragraph 17 it has been stated that in view of the facts and circumstances stated hereinbefore, it is evident that the company is unable to pay its debts. There are no allegations that the company is commercially insolvent or that the substratum of the company is lost. From the perusal of the petition it would be apparent that the pleas taken therein pertain to Section 434(1)(a) of the Act. The requisite pleadings under Section 433(e) or 434(1)(c) of the Act are wanting. As the petition lacks the requisite facts as required under Section 433(e) and 434(1)(c) of the Act, the petitioner cannot claim the advantage thereof and fall back upon the aforesaid provisions after failing to satisfy the court regarding the validity of the notice under Section 434(1)(a) of the Act.
16. I, therefore, find substance in the preliminary objection raised by learned counsel for the respondent-company and hold that the winding up petition is not maintainable as the notice under Section 434(1)(a) was not served on the registered office of the company at Kanpur. However, it shall be open to the petitioner, if so advised, to serve the required notice at the registered office of the company afresh. It is made clear that the observations, if any, made in this judgment regarding the alleged debt of the petitioner have been made for the purposes of the present case and if the petitioner has to file another petition, the same shall be decided on the merits uninfluenced by the observations made in the present case. In the facts and circumstances of the case, the parties shall bear their own costs.